Project report for a bank loan: what the credit officer checks in each section

What is a project report?

A project report (also called a DPR, detailed project report, or a project profile for smaller loans) is the document the bank uses to understand what you plan to do, what it will cost, how it will be paid for, and how the loan will be repaid. In plain terms, it is your business plan written in the bank's language. Example: for a ₹60 lakh embroidery unit, it explains the machines, the orders, the cost, and the yearly repayment, all in one file.

It is not a brochure. The credit officer does not need to be convinced that your idea is exciting; she needs to be able to check it. If you want the borrower-side reasons files are rejected, read why banks reject project reports. This article is narrower: what is in the report, and what is tested in each part.

Project report format: the sections

There is no single legal format. Banks and agencies such as the district industries centre have their own formats, and a bank may ask you to follow its own. But nearly every format covers the same six areas, and a credit officer reads them in this order.

• Promoters and firm: who you are, your experience, the constitution (proprietorship, partnership, company). The officer checks this against KYC, bureau reports and your net worth statement.
• Project and process: the product, the manufacturing or service process, machines, location, power and labour. She checks that the machines you list can make what you say, at the speed you say.
• Market and customers: who buys, at what price, on what terms. Real purchase orders or a track record of repeat customers carry more weight than a general statement that "demand is high".
• Cost of project and means of finance: every rupee of cost, and every rupee of funding, side by side.
• Projections: the profit and loss account, balance sheet and cash flow for the loan period, with the assumptions behind them written down.
• Ratios and risks: DSCR, current ratio, break-even, and what happens if sales fall or costs rise.

The credit officer is not checking whether your idea is good. She is checking whether your numbers agree with each other.

Cost of project and means of finance: the page that must balance

Cost of project is the total money needed to set the unit up: machinery, installation and electrical work, pre-operative expenses (registration, trial runs, interest during construction) and the part of working capital you must fund yourself. Means of finance is where that money comes from: the bank's term loan, and your own contribution, called promoter contribution or margin money. In plain terms, uses on one side, sources on the other, and the two must match to the rupee.

Example, in ₹ lakh and for illustration only: a Surat embroidery workshop buys six multi-head machines for 42, spends 6 on installation and electrical fittings, 2 on pre-operative expenses and 10 as its share of working capital: total 60. The bank lends 45 and the promoter brings 15, which is 25%. The officer will then ask the question borrowers least expect: where did the 15 come from? Savings visible in the bank statement or ITR, a sale of property, or a loan from a relative with a written trail are all easy to answer. Cash that appeared last week is not.

Projections: realistic versus inflated

Projections are the part of the report most often written to please. Capacity utilisation, selling price, raw material cost and receivable days are the four assumptions that drive everything else. In plain terms, if the assumptions are generous, every ratio the report produces is generous too, and the credit officer knows it.

A new unit rarely runs at full capacity in its first year: staff are learning, orders are being won, machines are being tuned. A realistic report starts lower and builds, say 60% in year 1, then 70% and 80%. Banks usually want cover for the instalments comfortably above 1; the exact figure is the bank's own policy, and the DSCR article shows how it is calculated.

In the chart, the same unit with the same loan shows two stories. The inflated report claims ₹38 lakh available to repay ₹14 lakh of instalments (DSCR 2.71). The realistic report shows ₹17 lakh against ₹14 lakh (DSCR 1.21). The second is a thinner margin, but it survives the officer's checking: she compares your assumed sales with turnover in GST returns, with what similar units in the area achieve, and with what the machines can physically produce. The inflated version fails that check and drags the credibility of the rest down with it.

How the report is checked against your other papers

The project report is not read alone. Past sales in the report must match the GST returns and ITRs; the opening balance sheet must match the last audited accounts; the promoter's own contribution must match the bank statement. Every section links to a document in the term-loan document checklist. Where there is a difference, a short written explanation attached to the report is far better than having the officer find it.

For working-capital limits, the report is usually supported by CMA data; see CMA data explained. For a sector view of how banks read these files, see the notes on powerloom units and diamond units.

Before you write it

• Collect last two to three years of ITRs, GST returns and bank statements first, then write projections from them.
• Get written quotations for every machine; the cost table should match them.
• Decide the realistic utilisation per year and write one line explaining why.
• Know where the promoter contribution will come from, with the paper trail.
• Ask the branch which format it prefers before you start.

This article gives general information, not advice on a specific loan. Bank formats and policies differ; confirm with your lender.

This article is general information, not professional advice. Rules change; verify current provisions or contact the office for advice on your situation.